Insurance Guidebook COMPANY

Back to Basics
Explaining Auto Insurance in Ontario

In Ontario, it is a requirement for all drivers to carry valid
automobile insurance. While many people know that
carrying insurance is mandatory, they aren’t familiar
with some of the key terms and processes — or even
what’s inside their policy. Too often, drivers become
educated once they need to make a claim, and that can
be too late.
This guidebook is intended to provide an introduction to
some of the key elements of auto insurance in Ontario.
It is not meant to be a replacement for the knowledge
of licenced Insurance Agents or Brokers, or the
contents of your auto insurance policy (known as
OAP 1: Ontario Automobile Policy Owner’s Policy).
The OAP 1 policy details the rights and obligations of
both the insured and their insurance company, and can
be accessed from the Financial Services Regulatory
Authority of Ontario (FSRA).
The following pages contain key terms and concepts
explained in a simplifed manner. This information will
help you have deeper and more productive discussions
with your licenced Insurance Agent or Broker, who can
provide tailored advice as you review your insurance
policy and options in the future.

Insurance should be clear and easy to understand. That’s why we created this handy insurance
guidebook to explain some of the most commonly used terms you should know.

Remember, always speak with your Insurance Agent or Broker if you have any questions. They’re
available to help.

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Auto Insurance
There is no one-size-fts-all solution
when it comes to purchasing auto
insurance. To make sure you get
the right coverage for your specifc
needs, it’s important to talk to your
Insurance Agent or Broker.
Accident Forgiveness
Accident Forgiveness is offered by most
insurance companies and can be added to your
insurance policy if eligible. This may protect your
premium in the event of a loss.
For example, when you have Accident Forgiveness
coverage and have your frst at-fault accident,
this may protect your current driving record. It
may also keep your premium from going up as a
result of the accident.
Accident Forgiveness eligibility and rating varies
by insurance company. Ask your Insurance Agent
or Broker about this, as not all insurance
companies offer it.
Actual Cash Value (ACV)
Actual Cash Value is the current market cost to
repair or replace an item, less its depreciation
(how the item has aged, deteriorated or became
obsolete over time). This term is often used
when discussing a Total Loss.
Insurance Agent vs. Broker
An Insurance Agent sells insurance for a specifc
insurance company.
An Insurance Broker sells insurance for many
different insurance companies.
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Cancelling Your Insurance
An insurance company can cancel your
insurance during the policy term but must
provide you with registered written notice with
specifc reasons. A complete list of reasons can
be found on the Financial Services Regulatory
Authority of Ontario (FSRA) website, as part of
the Ontario Automobile Policy Owner’s Policy
(OAP1).
You can also cancel your policy at any time, but
you must always have valid insurance if you are
driving. Be sure to ask if there is any penalty for
cancelling your active policy before it’s up for
renewal.
Claim
An insurance claim is a formal request by
a policyholder to your broker or insurance
company for compensation of a covered loss.
Filing a claim does not necessarily mean you will
receive a payment. (The reason for the loss must
be covered under the policy and its terms met).
Commuting (driving to and from work, Depreciation considers how the value of an item
school or transit terminal) has decreased over time — usually due to everyday
Commuting takes into account the distance you
drive to work, school or to a public transit
parking lot.
For example, if the distance from your home to
your work is 10 km, your roundtrip commute
would be 20 km per day.
Deductible
Insurance companies use deductibles to share
the cost of any claims with the policyholder.
When you fle an insurance claim, a deductible is
the amount of money that you are responsible to
pay, as outlined in your policy.
For example, if your policy’s deductible is $500
and you have a covered loss under your policy
that totals $10,000, you’ll pay $500 and your
insurer will cover of the remaining $9,500.
Demerit Points
Drivers in Ontario who are caught failing to follow
road rules can have demerit points applied to
their driving records. They range from two points
added for minor offences (e.g. speeding,
improper turns) to seven points for more serious
traffc offences (e.g. impaired driving, feeing the
scene of a collision).
When calculating your Ontario car insurance
premium, your insurance company considers the
type and class of conviction you received.
Factors in determining your premium include any
minor, major or criminal convictions you have
been charged with.
For example, if you are convicted of exceeding
the speed limit by 16 to 29 km, you will have
three demerit points added to your driver’s
licence.
Depreciation
wear and tear (e.g. ageing, deterioration, and
obsolescence).
For example, your brand-new vehicle will
depreciate (or decrease) in value over time,
depending on how many kilometres you’ve driven
and how well you’ve maintained the vehicle.
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Driver’s Licence Levels Ontario Automobile Policy (OAP 1)
In Ontario, a graduated licence format is used for Owner’s Policy
G level (passenger vehicle) licences. There are The OAP 1 is your automobile policy. It explains the
two learning levels (G1 and G2) that drivers must rights and responsibilities of the insured (you) and
complete, along with two road tests to receive of the insurance company (insurance company).
a full G licence. The OAP 1 outlines your automobile coverage
G1 and G2 licences allow a new driver to and the terms.
practice and improve their skills but include
restrictions on where and when they can drive.
Under a G1 licence, drivers are prohibited from
driving on 400-series highways or high-speed
expressways, and cannot drive between
midnight and 5:00 a.m. In addition, a fully
licensed driver with at least four years of driving
experience is required to be in the vehicle with
the G1 driver.
Pleasure Driving
G2 drivers have fewer restrictions placed on
Pleasure driving means that you only use your
when and where they can drive. They are not
vehicle for personal or leisure activities and not
required to have an experienced driver in the car
for commuting or business purposes.
with them and are permitted to drive on all
Ontario roads. G2 level drivers are required to
Policyholder
have valid auto insurance coverage.
This is the person (also known as the named
When you become a full G driver, all restrictions
insured) who has an insurance policy with an
are lifted.
insurance company and is the registered owner
For a complete list of requirements under the of the vehicle.
graduated licencing system, please visit the
Ministry of Transportation (MTO) website. Policy Term
A policy term outlines the length of time you are
Household Drivers covered. It states the date and time that your
All licensed drivers in your household must be policy begins and ends.
listed or noted on your auto insurance, even if
they are insured with a different company. If you
do not list everyone, it could impact your coverage. Principal Driver
A principal driver is the person who drives the
Occasional Driver car most often. The driving record of the principal
An occasional driver or secondary driver on a car driver will affect the car insurance premium. Your
insurance policy is a person who is not the primary auto insurance policy will typically cover all the
or principal driver of the insured vehicle. This person people in your household and multiple vehicles.
could be a spouse, child or relative.

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Premium
An insurance premium refers to how much your
insurance policy will cost, generally paid on
a monthly or annual basis.
Your premium is calculated by many factors
including but not limited to:
• The type of vehicle you drive
• Your driving history, age and gender
• How you use your vehicle (driving to work,
business or commercial use or pleasure
driving only)
• Number of kilometres you drive a year
• Any accidents or driving convictions
• Any additional coverages chosen by the
policyholder
• Where you live
These and other factors can make a difference in
how much you pay for insurance.
Proof of Insurance
A Motor Vehicle Liability Insurance Card (also
referred to as Pink Slip) is the proof of insurance
you receive from your insurance company once
you have purchased coverage. The Pink Slip is
designed to serve as proof of automobile third
party liability insurance.
Many Ontario insurance companies now offer an
electronic version which is accessible on your
smartphone.
Registered Owner
The registered owner is a person that owns a
vehicle and is responsible for insuring the vehicle.
Telematics
Telematics for auto insurance refers to technology
that monitors your driving behaviour to provide an
objective picture of your driving habits, in real-time.
User-based insurance (UBI) monitors your
personal driving habits using a device in your
vehicle. A plug-in device or an app is used to
track your driving habits. This type of insurance
may offer you savings on your premium at
renewal, for your safe driving.
Pay-as-you-go insurance allows you to buy
insurance for the distance you drive. Unlike UBI
which records how you drive, pay-as-you-go
insurance only uses the distance driven to determine
how much you pay. Your kilometres are tracked
through a device in your vehicle. You can monitor
how much you drive through a smartphone app.
Underwriters/Underwriting
Underwriting is the practice of collecting information
and assessing risk. This information is analyzed
based on the insurance company’s underwriting
guidelines, to decide whether an insurance
company will accept the risk (you) by offering you
coverage.
Waiver of Depreciation
A Waiver of Depreciation is available for new
vehicles and will vary by insurance company. It
means that if you experience a total loss due to
theft or an accident, and you are the original owner
or lessee of the vehicle, you will be reimbursed for
the full replacement value — not the vehicle’s
depreciated value. A Waiver of Depreciation can be
added to your insurance policy at the time of
purchase.
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 At-fault
This refers to the person who was responsible for an
auto accident. The at-fault driver’s auto insurance
can cover liability resulting from injury and property
damage claims made against the driver.

No-fault Insurance
No-fault insurance simply means that you deal
with your own insurance company, regardless of
who is at fault for the accident. Your insurance
company will handle benefts resulting from injuries
Understanding to you or damages to your vehicle regardless of
who was at fault for the collision, based on the
At-fault and fault determination rules.

No-fault Fault Determination Rules

Even though it’s called No-fault insurance, by

Insurance Terms law, insurance companies have to decide on

Understanding the ins and outs of
at-fault and no-fault insurance can
be confusing.
Here, we break down the most
important terms you need to know.
the percentage of fault for each of the drivers
involved in the accident for the purpose of direct
compensation – property damage claims. This
is done by using Fault Determination Rules.
For example, Driver A is stopped at a red light
and is hit from behind by Driver B. According to
the Fault Determination Rules, Driver B is
100% at-fault for the accident.

Minor At-fault Accident

An accident is considered minor if no one was
injured and the damage to any property — and
to each vehicle — does not exceed $2,000.
If you are at-fault in a minor accident and you
pay for the repairs to the vehicles and property
involved, it is important to check with your
Insurance Agent or Broker to see whether the
accident will have any impact on your insurance
premium.
Note: Minor accidents may have an impact on
your insurance if they happen more than once
within three years. Ask your Insurance Agent or
Broker for more information.
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 Mandatory Insurance Coverage
Auto insurance is mandatory in Ontario. The

t ' ,.
required coverage includes:
• Accident Benefts
• Direct Compensation – Property Damage
• Liability
• Uninsured Automobile

Insurance coverages defned:

Accident Benefts
What’s Included This coverage regulated by the Statutory
Accident Benefts Schedule (SABS) is required
in Insurance? under Ontario’s Insurance Act. It provides certain
benefts like medical care, rehabilitation, income
replacement and other needed services for
recovery, regardless of who caused the collision.
It provides compensation if you, your passengers
or pedestrians are injured in an auto collision.
Accident Benefts also provide certain benefts in
the event of loss of life.

Accident Benefts cover:

• Medical and Rehabilitation Benefts
• Caregiver and Attendant Care Benefts
• Income Replacement benefts (Non-earner
benefts)

Optional Benefts (coverage you can add on

to your policy) include, but are not limited to:

• Housekeeping
• Home Maintenance Benefts
• Caregiver Benefts
• Enhanced Income Replacement Benefts

Additional and increased optional benefts are

available.

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Direct Compensation Property Damage Extended Health Benefts
(DCPD) If you are injured in a collision and you have
This covers any damage to your vehicle and its extended health benefts through your employer,
contents at actual cash value, if another person you will use that coverage frst before your
is at-fault for the collision. It is called direct insurance company will cover any healthcare
compensation because even though someone costs related to the collision. This is not meant to
else caused the damage, it is you who collects replace existing extended health benefts that
directly from your insurance company. you may already have in place — it is only to
supplement, if needed.

Collision or Upset Coverage

If you are considered at-fault for an accident,
Collision coverage will pay for damages to your
vehicle caused by an upset (tipping over) or
collision with another vehicle, person, object or
ground surface.

Comprehensive Coverage
Comprehensive coverage focuses on damage
that happens to your vehicle from things other
than a collision.
Typically, it includes things like fre, vandalism,
theft or attempted theft, weather-related damage
(hailstorm, fallen tree), a natural disaster or a riot
or civil disturbance. This coverage can be added
to your policy.

All Perils
All Perils coverage combines collision and
comprehensive coverage for your vehicle under
one deductible. It also includes coverage for loss
or damage to your vehicle if it’s stolen by
someone in your household. This coverage can
be added to your policy.

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 Driving Record
A clean driving record translates into a lower
premium. A driver with at-fault accidents
represents a risk to the insurance company.
You’ll also probably pay more if you have more
than one ticket in the last three years for things
like speeding or careless driving.
For example: A ticket in Ontario will remain on
your driving record for three years from the date
you paid or were found guilty in court. As such, it

What Can
will affect your insurance premiums for those
three years. If you get more driving tickets during
that timeframe, the effect will be even more
Impact Your signifcant.

Insurance Photo radar: the exception

New technologies like red light cameras or photo

Rates? radar (also referred to as automated speed

enforcement), photograph the licence plates of
vehicles that speed or fail to stop for red lights.
A ticket is issued and sent to the registered
owner of the vehicle.

Since the ticket is issued to the vehicle and not

the driver, photo radar infractions will not affect
your insurance rates.

Endorsement
This refers to a change or addition to a policy that
increases or reduces the amount of coverage and
changes its terms and conditions.

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Liability Insurance
Liability insurance covers you for claims where
you are required by law to pay a third party for
bodily injury and property damage.
Bodily Injury coverage covers the claim if
another person is injured or killed, and you are
deemed to be responsible.
Property Damage coverage will cover the claim
if someone else’s property is damaged as a result
of an accident.
Misrepresentation
If you provide false information to an insurance
company or leave out certain facts to receive
a beneft to which you are not entitled, the insurance
company may void, deny your claim or cancel
your coverage.
First Notice of Loss
When you experience a loss, you must let your
insurance company know. This frst step in the
claims process is referred to as a First Notice
of Loss.
Proof of Loss
This is a formal statement you make under oath
to an insurance company, regarding the details
of a loss.
Replacement Cost
This is the actual cash value of the vehicle at the
time of loss.
Reportable Claim
You must report an accident if the damage to
both vehicles combined is greater than $2,000.
You must also report if someone is injured, if
property is damaged, or if it involved a driver
who doesn’t have auto insurance.
Total Loss
A total loss is when the cost to repair the vehicle
is higher than the Actual Cash Value (ACV) of
the vehicle.
It isn’t always practical to repair a vehicle, even if
the cost of repair is less than its actual value.
Factors such as vehicle safety, quality of the
repair, costs and vehicle values are all considered
in determining if a vehicle is repairable.
Depending on your insurance company, the
value of your vehicle is determined based on
things like pre-accident condition of the vehicle,
the number of kilometres on the odometer, the
options available on the vehicle and any existing
damage prior to the accident.
An insurance company reserves the right to
deem your vehicle as a Total Loss.
Vehicle Repairs
Depending on which costs the least, insurance
companies will pay either the Actual Cash Value
of the vehicle, or the cost to repair or replace it
(with a similar kind and quality).
Winter Tires
Insurance companies in Ontario are required to
provide a discount on auto insurance for drivers
who install a set of four matching winter tires
designed for use on snow and ice. Ask your
insurance company for more details on
discounts.
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 When should I notify my insurance
company about changes?
You should update your broker or insurance
company if any of the following happens:

CJ Your address changes.

• If you move out of province, you will need to
get coverage in the new province and cancel
your current policy
• Any other address changes must be

You and Your communicated to your insurance company

Your vehicle usage changes.

Policy • You drive further to work, stop driving to work,
or your driving status changes (e.g. moving to
pleasure, business, commuter)
• You start using your vehicle commercially (e.g.
you started driving for a ridesharing company).
• More people will be driving your vehicle
• The main driver (principal driver) of the vehicle
changes
• You are selling your vehicle or transferring title
• A driver on the vehicle receives a licence
suspension
• You need to add or remove vehicles from your
policy
• You start using your vehicle for business

This section provides a series of recommendations,

however requirements and processes may vary
by insurance company.

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Can I reduce my insurance costs if I am What do I need to know after being
driving less? involved in a collision?
If you are driving less, your premium may be
reduced if there are changes to the average
number of kilometres you drive, or the type
of drivers you have on your policy.
We also recommend that you contact your
Insurance Agent or Broker to talk about any
savings that may be available to you.
My teenager just got their G1/G2. What 4. Follow the instructions given to you by the
do I need to know to insure them on my emergency services on scene.
policy?
When adding an occasional driver on your policy:
• If more than one vehicle exists on the policy,
they may be assigned to the highest-rated
vehicle (usually the vehicle that charges the
most premium).
• If they are attending a post-secondary
school and are living away from home, they
may qualify for a student discount if offered
by the insurance company.
• Drivers at the G1 and G2 levels are subject
to time-of-use restrictions, as well as
a zero tolerance for alcohol and cannabis
while operating a vehicle.
• If you’re adding them as a driver of a new
vehicle, in addition to the new vehicle details,
you will need to provide their estimated
annual driving mileage. Also, if they are
commuting to work or school, provide the
distance in kilometres (one way).
• You may want to consider enrolling them in
a telematics program to help save on their
premium.
1. If you are injured, don’t move. Stay in your
vehicle.
2. If you are not injured, proceed to number 5.
3. Dial 911 if:
• Someone is injured.
• There is signifcant damage to any of the
vehicles involved in the collision.
• You think the other driver may be guilty of
a criminal offence, such as impaired driving.
NOTE: In Ontario, all personal injury collisions and
all collisions resulting in property damage of $2,000
or more must be reported to the police.
5. If it is safe to do so, move the vehicle(s) to the
side of the road. Turn on your hazard lights and
use warning triangles or fares if available.
6. Record details of the collision.
• Include the time, date and location, speed
of your vehicle, weather and road
conditions.
• Once you are in a safe location, take
photos of the scene with a camera or
mobile device, or draw a sketch of it.
7. Exchange information with the other parties
involved.
• Regardless of the circumstances, never
admit fault for the collision or assign blame
to the other driver. Your insurance company
will determine fault based on Fault
Determination Rules regulated by the
Ontario provincial government.
• Never sign any documents regarding fault
or promise to pay for damages.
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8. If there are witnesses, get their names and
phone numbers.
9. If you need to be towed to a Collision Reporting
Centre (CRC):
• Contact your insurance company before
signing or authorizing any towing or other
documentation.
• All vehicles that require a tow must go When I go on vacation, do I need to tell
directly to a CRC from the scene of the my insurance company?
collision. Have your vehicle towed to the This depends on where you are going, how long
CRC most convenient to you and you will be away and if you are taking your vehicle.
accompany your vehicle. If you are staying within Canada or travelling to
• Bring all documentation to the CRC, the U.S. it is not necessary to advise your
including driver’s licence, ownership, insurance company, however you may want to
insurance, details of the collision and discuss liability limits for the destination you are
information about the other parties travelling to.
involved. Some insurance companies may have a six
• You must report the collision in person, to month, out-of-province time limitation. Be sure
a CRC within 24 hours of the collision if: to check with your Insurance Agent or Broker.
Additionally, your Canadian insurance many not
o Damage is valued at more than $2,000
fully cover you elsewhere in the world without
to vehicle(s) or property.
obtaining specialized coverage. Contact your
o The police were not present at the scene. Insurance Agent or Broker if you need confrmation.
o The damage to your vehicle is minor
and you can drive it safely to the CRC. International Driving Permit (IDP)
We strongly recommend that travellers get an
10. Call the Claims Department of your insurance International Driving Permit (IDP) if their destination
company as soon as possible. requires it.
11. Check to see if your insurance company will An IDP is a document which, when accompanied
arrange for pick-up and towing of your vehicle by a valid driver’s licence, enables a person to
from the CRC to a repair facility. drive vehicles for tourism purposes in many
12. Remember to exchange the following foreign countries.
information:
• Full name
• Address
• Phone numbers
• Licence information
• Vehicle information
• Insurance company name and policy
number

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This advice is intended to provide general information only and is not intended to provide legal or professional advice or to be relied on in any dispute, claim, action, demand or proceeding.
CAA Insurance Company does not accept liability for any damage or injury resulting from reliance on this information. (81857-11/21)